Business leaders brief Habibie on economic crisis
JAKARTA (JP): Business leaders briefed President B.J. Habibie yesterday on the critical condition of the economy and called for more concerted efforts to revive the banking industry, the source of lifeblood for economic activity.
The government needs to act quickly and firmly to lead the banking industry out of its virtual paralysis, Aburizal Bakrie, chairman of the Indonesian Chamber of Commerce and Industry (Kadin) told reporters after a meeting with Habibie at Bina Graha presidential office.
"The Indonesian Bank Restructuring Agency (IBRA) should be further empowered to strengthen the problem banks currently under its supervision and management," Aburizal added.
Aburizal led a large delegation of Kadin executives to a first meeting with the President to appraise him of the dire economic situation and to suggest ways of resolving the crisis.
The Central Bureau of Statistics reported Monday that the country's gross domestic product contracted 8.51 percent in the first quarter and projected a total negative growth of more than 10 percent for the year.
Kadin suggested that the government select a number of private and state banks, based on a set of criteria, to be quickly developed into anchor banks which would be fully trusted domestically and internationally.
"These anchor banks could eventually be merged with the (54) problem banks currently being restructured by IBRA," Aburizal added.
Most Indonesian banks now face extreme financial difficulties as a result of the 80 percent depreciation of the rupiah against the American dollar.
High interest rates, a severe lack of liquidity and low capital levels and huge bad loans are further crippling most banks and consequently the corporate sector.
Analysts say most banks currently cannot extend loans and are desperate to collect on outstanding loans so they can satisfy depositor and creditor payment demands.
The central bank said that as of late last month it had pumped more than Rp 124 trillion (US$12.4 billion) in liquidity credits to banks facing severe liquidity problems.
Interest rate
Kadin suggested yesterday that the central bank lower its benchmark interest rate from its current 58 percent level because businesses could not handle such punitively high capital costs.
The chamber said the government and businesspeople, irrespective of company size or ethnic group, should join hands in restoring production and distribution facilities.
A large number of business establishments, including shops, shopping malls and bank offices in Jakarta, its surrounding areas and several provincial cities, were severely damaged from looting and arson last month.
Most of the damages were inflicted upon the businesses of ethnic Chinese businesspeople.
Aburizal added that Kadin supported the President's plan to appoint special envoys with an ambassadorial rank from the private sector with the specific task of restoring international confidence in Indonesia's economic prospects and business sector. (vin)